Mergers and acquisitions activity heating up
Companies showing renewed willingness to explore dealsNEW YORK -- Cablevision acquires cable operator Bresnan in a $1.3 billion deal. News Corp. buys e-reader Skiff and is looking at an $11 billion-plus buyout of the 61% of BSkyB that it doesn't own. Private-equity titan Kohlberg Kravis Roberts might invest $250 million in CAA.
These recent headlines provide evidence for the renewed willingness of media and entertainment players to explore mergers and acquisitions after a lull driven by the recession and financial crisis.
All this comes just in time for investment bank Allen & Co.'s annual media mogul gathering in Sun Valley, Idaho. Kicking off just after the Fourth of July weekend, the event again will bring together big names from the entertainment and tech business worlds and is expected to heat up summer deal speculation.
Amid rebounding stock prices and business trends, the general market conditions for deals have improved. Companies across several sectors are feeling more comfortable about putting cash and stock into deals again, and they've found it easier to access the debt market to raise additional funds.
"M&A activity has been picking up mainly because of the credit markets' having been in the repair period," Miller Tabak analyst David Joyce said.
During recent weeks, the European debt crisis and big stock market swings have put a damper on the M&A market in what could prove a mere a blip on the industry's radar screen. But bankers also acknowledge that no wave of transformative M&A activity has materialized post-recession.
Some had predicted more big moves in the wake of two huge deals in second-half 2009 -- Disney's acquisition of Marvel and Comcast's play for NBC Universal. Instead, most deals continue to focus on cleaning up ownership stakes, getting full control or adding assets with attractive benefits in core businesses.
"That's good because investors don't want a return of mega-mergers that fail," one big investor said.
Indeed, most media congloms have remained conservative in their M&A approach after mega-mergers of the past, expectations of a slow economic recovery and fears of a new debt crisis.
Just look at recent comments from CEOs of sector biggies during their quarterly earnings calls.
"We continue not to see any major acquisitions in our future," Viacom's Philippe Dauman said. News Corp.'s Chase Carey said his company would be "selective and judicious" about deals. Time Warner chief Jeff Bewkes said, "We will continue to be very disciplined as we look at acquisitions."
During a PricewaterhouseCoopers event Tuesday, CBS Corp. president Leslie Moonves said of investors' focus: "Nobody wants us to buy anything. We are not looking for any major acquisitions."
PwC predicts that sector companies will concentrate on easily digestible deals in their core businesses.
"The focus will continue until the industry's tolerance for risk rebounds and attention shifts toward growth and investments in new media," the consultancy said.
Film and cable assets have been the focus of recent chatter. Here is a look at deals that Wall Street and sector folks are talking about:
The deal announced late last year that would create a content and distribution powerhouse goes against the industry trend to focus on one set of assets. Expect it to be a topic of debate in Sun Valley just as it has been all year on Capitol Hill and in Hollywood. Regulators are expected to decide the deal's fate late this year.
In a key victory for Comcast, it last week touted support for the transaction from labor unions. The International Brotherhood of Teamsters joint council 42 (representing 200,000 workers and retirees in Southern California and Nevada) and local 399 (5,000 workers in Hollywood) filed letters with the FCC expressing support.
After talks with the Weinstein Co. broke off, Disney continues to work on a sale of the studio, even though MGM has not gotten its price and some question whether Miramax can draw as much as it wants. One banker predicts a $650 million-$700 million final price tag if a deal can be finalized. Investors Tom and Alec Gores and a group advised by David Bergstein have been in the running.
The firm is evaluating whether to sell or shutter Overture Films and home entertainment arm Anchor Bay; a sale could fetch about $300 million. The Gores brothers are players here, too, and another film studio and an investment group are believed to be interested. Liberty alternatively is considering keeping Anchor Bay and merging it into its Starz Entertainment premium channels group.
In recent days, one Wall Street rumor had Liberty open to a sale of the Starz channels once the future of the film operation is decided. Disney and Sony are parties that could look at such an opportunity as they are Starz's main film suppliers.
Just more than a year after the merger of WMA and Endeavor, CAA is talking to KKR about an investment of up to $250 million to allow agency partners to cash out and give the investment firm a stake in the agency.
Elsewhere on the media and entertainment waterfront, small cable operators also have been targeted for acquisitions. Privately held Bresnan -- which serves more than 320,000 customers throughout Colorado, Montana, Wyoming and Utah -- agreed Monday to sell to Cablevision. In addition, Mediacom and RCN Corp. have an eye on going private.